ASBCA 61121

ARMED SERVICES BOARD OF CONTRACT APPEALS Appeal of -- ) ) Missouri Department of Social Services ) ASBCA No. 61121 ) Under Contract No. W911S7-09-D-0029 ) APPEARANCE FOR THE APPELLANT: Keith L. Baker, Esq. Baker, Cronogue, Tolle & Werfel, LLP McLean, VA APPEARANCES FOR THE GOVERNMENT: Raymond M. Saunders, Esq. Army Chief Trial Attorney ChristinaLynn E. McCoy, Esq. CPT John M. McAdams III, JA Trial Attorneys OPINION BY ADMINISTRATIVE JUDGE MCILMAIL In November 2016, we found appellant entitled, under Federal Acquisition Regulation (FAR) 52.249-2(1), to an equitable adjustment of the prices of the portion of its dining services contract that continued after the government terminated the contract in part by eliminating from the contract 6 of the 18 dining facilities originally covered. Missouri Department of Social Services, ASBCA No. 59191, 16-1 BCA ,i 36,563 at 178,093, 178,095-96. Familiarity with that decision is presumed. Because the parties have not been able to settle upon quantum, we address that now. FINDINGS OF FACT We found in the entitlement decision that: The record in this appeal contains evidence that the reduction in production hours caused by the termination of six facilities increased appellant's cost of performing the remaining work. Its original pricing proposal estimated 1,279,423 production hours for all 18 facilities per year, but after the elimination of six facilities the revised estimate of total production hours per year was 980,682. This would indicate that without an upward revision to the "retail rate" for Option Years 2 and 3, appellant would not recover all of its fixed costs. This is because when contract pricing is calculated using the same arithmetic as used in the original pricing proposal; the fixed costs have  not changed but the number of production hours has gone down, increasing the price per hour. The record indicates that the retail rate would have to increase from 23.8053 to 25.2242 for Option Year 2 and from 24.6301 to 26.4137 for Option Year 3 in order for appellant to recover its fixed costs to the extent provided for in its original proposal. Missouri Department ofSocial Services, 16-1 BCA ,i 36,563 at 178,095 (citations omitted). We also found that "[a]ppellant and the government entered into a different contract than existed after 6 October 2011-one that included 50% more dining facilities and 298,741 more production hours than did the contract after partial termination." Id. at 178,096. During the entitlement hearing, appellant's expert testified that appellant had approximately $717,000 ofunrecovered fixed costs in Option Year 2 and $805,054 of unrecovered fixed costs in Option Year 3.* Missouri Department of Social Services, 16-1 BCA ,i 36,563 at 178,095. To put that in context, appellant's estimated revenue for Option Year 2 (that is, total cost and profit) was $30,457,068.71. Id. at 178,093. In developing its pricing for the original contract, appellant applied a profit rate of 3%. Id. The Defense Contract Audit Agency found that "the basis or theory of recovery of the costs in [the expert's report] is logical and the calculation is correct, but it is based on the estimated data" (R4, tab 153 at 5). Appellant's expert reprised his presentation at the quantum hearing, again reporting that based on proposed costs, appellant's unrecovered fixed costs (plus 3% profit) were $1,522,617 for Option Years 2 and 3 (R4, tab 167 at 8). On an incurred cost basis, he testified that appellant's unrecovered fixed costs (plus 3% profit) were $681,795 in Option Year 2 and $553,507 in Option Year 3, for a total of $1,235,302 (tr. 1/146; R4, tab 168 at 3). Appellant incurred $73,125.75 in "settlement expenses"; that is, legal, clerical, and similar costs incurred for the preparation and presentation of its request for equitable adjustment and its partial termination settlement proposal (app. br. at 26). On June 24, 2013, appellant submitted to the contracting officer its certified claim for the increased costs of performing the remaining contract work.